I get this questions all the time, “What Are Closing Costs?” When you buy a house you have the purchase price cost and you have closing costs. The costs combined make up the total amount you will spend for the house. You may also have additional costs such as hiring various inspectors to inspect the well, house, septic and the heating, ventilating, air conditioning (HVAC) systems. So, as you can see, buying a home entails more out-of-pocket expenses than just the down payment. Further more, there are also costs to pay for items such as the title insurance policy, recording fees, courier charges, reserves to set up an impound account and fees that a lender charges. Lender fees are usually the bulk of closing costs and can be quite expensive. However, there’s a way to have the Seller pay you closing costs, read on. [Read more…]
VA Loans – Allowable and Non-Allowable Fees
Within the last 10 or more years, VA Loans have become more profitable and have facilitated the purchase homes by veterans. In some cases, without the VA loan certain veterans would still be renters and not homeowners. Since 2007 VA and FHA Loans have gone main stream and are providing the financing of or financial recovery. Unlike conventional loans, VA loans have certain fees that cannot be paid by the borrower. In the lending business they fees are often referred to as “allowable” and “non-allowable” fees. In this blog post I will attempt to clear-up some of the confusion surrounding VA loans.
As you may know, borrowing money cost money; not only the interest and repayment of the debt but the cost of obtaining the loan. There’s work involved when processing a loan and the cost for this work or service is referred to as “loan fees.” The Department of Veterans Affairs determines what closing costs the veteran (borrower) is allowed to pay. The local VA office determines the allowable costs based on local custom. Therefore, allowable costs may be different in different states. The VA provides lending guidelines which cover the fee names and categories. However, due to regional differences they don’t cover them all.
After an escrow is opened your mortgage broker or lender will send a request to escrow for an estimated HUD1 statement. A VA loan is backed by the full faith and credit of the United States Government. Because it is tied to Government money, federal bureaucrats decided which fees the borrower can pay and which fees must be paid by someone else. Among other things, the HUD clearly defines the fees associated with the transaction and allocates the fees to the borrower or someone else.
The rules become a little more complicated if the loan is being originated by a Mortgage Broker and not a direct lender. For example, if the Mortgage Broker is charging an “Origination Fee”, the Mortgage Broker is required to credit the Buyer/Borrower for all non-allowable fees.
Since all of the fees are in a sense a “hot potato” be certain your real estate agent or attorney clearly stipulates the allocation of fees in the Purchase Agreement. Otherwise, your loan and escrow could blow-up halfway through escrow. Not fun.
Let’s get to the point, what are VA non-allowable fees?
- Document preparation
- Loan closing or settlement(escrow)
- Attorney services for anything other than title work
- Preparing loan papers for conveyance
- Locking in interest rate services
- Mailing or postage charges, telephone calls, amortization schedules, general overhead
- Escrow charges
- Document preparation, notary, loan application, processing, loan broker fee other than your mortgage company, trustee’s fees or charges and tax service.
To obtain a copy of a more complete list of allowable and non-allowable closing costs please click here; VA list of fees
When making purchase offers using a VA loan you may find a seller will bypass your offer for another or, flat out reject your offer. This could happen if the seller has already reduced the price of their property to their bottom line. Accepting an offer with a VA loan contingency means the seller would end up paying most, if not all of the non-allowable costs. Contrary to popular belief, the seller has no obligation to pay the buyer’s/borrower’s non-allowable costs. The seller can decline your purchase offer all together or offer to pay a portion of the closing costs with other parties to the transaction picking up the difference. Sometimes the mortgage broker and real estate agents will decide to pay a portion of your closing costs. In summary, as long as a party to the transaction other than the buyer pays the fees, the loan can go through and escrow can close.
There are several strategies you can use when writing offer using a VA loan. A good real estate agent or broker will guide you through the process of writing offers that seller’s may not like but will be afraid to reject.
Shasta County Housing Program Increases Income Limits
The Shasta County Down Payment Assistance Program (D.A.P.)has increased the maximum allowable income limits for home buyers.
The Shasta County DAP is very similar to the City of Redding DAP program with the exception of the income requirements and the maximum purchase price. Both of these programs are designed to assist low income first time home buyers with buying a home. A first-time home buyer is someone who has not owned a home in the last 3 years, or who qualifies as a “displaced home-maker”
Shasta County Housing and Community Action Down Payment Program provides 0% interest loans to qualified low-income, first-time home buyers to help with their down payment and closing costs. The program is available in the unincorporated area of Shasta County and inside the City of Anderson.
To qualify for the Shasta County Down Payment Assistance Program applicants must meet the following income guidelines:
| Household Size | Annual Income | Monthly Income |
|---|---|---|
| 1 | $31,550 | $2,629 |
| 2 | $36,050 | $3,004 |
| 3 | $40,550 | $3,379 |
| 4 | $45,050 | $3,754 |
| 5 | $48,700 | $4,058 |
| 6 | $52,300 | $4,358 |
| 7 | $55,900 | $4,658 |
| 8 | $59,500 | $4,958 |
How much can you borrow?
The loan amount can be up to 37% of the purchase price. At the maximum purchase price of $165,000.00, the DAP loan could be as much as $60,000.00. The borrower must contribute at least 3% of the purchase price to the sale transaction. This may be a gift.
How do you Apply?
- Visit the Department of Housing and Community Action Programs to place your name on the waiting list for an application.
- Within 2 to 3 weeks, you will receive a letter asking you to pickup your application package.
- Return the completed application along with the requested documentation to our office.
- Contact a mortgage lender to obtain a pre-qualification letter.
More information can be found at the Shasta County Housing & Community Actions Page
Will Good Rental History Help Your Credit?
If you would have asked me this question a week ago, I would have said no. Most landlords and property managers do not report your rental history to the credit bureaus unless you do not pay and they have to evict you.
Last week I was working with a first time home buyer that had very little credit history. He worked hard, paid off his car loan quickly and never carried a credit card balance. He was in the process of purchasing a home in Redding with a 20% down payment. One would assume that this situation would be a slam dunk, right? Actually, it was not.
The loan underwriter was concerned about the buyers lack of credit history. So, the loan officer, scrambling to figure away to make this deal work, contacted one of the three major credit bureaus and provided them with the lease agreement and a statement from the landlord explaining that the rent was on time and the tenant was great.
After this change was applied to the buyers credit, the loan officer was able to re-submit the loan to the underwriter and they approved the loan! The last two years of good rental history was enough to put him over the edge.
After hearing about what this loan officer was able to do, I did a little research and concluded that this is something that every renter should do. The first step would be contacting the three major credit bureaus and ordering a copy of your credit report.
Experian-1-888-397-3742
www.experian.com
TransUnion-1-800-916-8800
www.transunion.com
Equifax-1-800-685-1111
www.equifax.com
Once you receive the report, verify that the rental history is not already listed. If it is not, you can contact the credit agencies and ask them to add the history to your report. They will most likely ask you for documentation to backup your claim, such as a copy of your rental agreement and copies of canceled rent checks.
I would love to hear your experiences with this. Please feel free to comment below.
Interst Rates, Lowest Level In Half a Century
For the 10th time in the last 11 weeks Freddie Mac reported a decline in fixed rate mortgages. The average interest on a 30 year fixed was 4.32% down from last weeks 4.36%. Economists credit the week economy and high unemployment rates.
As separate report from Bankrate, which is based on data provided by the top 10 banks in the U.S. also found mortgage rates falling. They reported the average conforming 30 yr fixed rate mortgage dropped from 4.59% to 4.53%. Bankrate said in their report “Nervousness about the economy brought mortgage rates lower, as has consistently been the case since May. An upcoming jobs report promises to add further volatility to mortgage rates.”
The company added, “While low mortgage rates have produced a surge in refinancing activity, they aren’t packing the same punch on home purchases because would-be buyers are saddled with existing real estate they can’t sell, are nervous about their jobs, or remain convinced that home prices have further to fall.”
Mortgage Rates Drop to Lowest Level of the Year
(DSnews.com) Mortgage interest rates have fallen to their lowest level of the year. Economists say homebuyers have the financial turmoil in Europe to thank for that, as overseas investors have put their dollars instead towards what they see as safer U.S. securities.
The mortgage industry has been bracing for a rise in interest rates now that the Federal Reserve has ceased buying mortgage-backed securities. But with international money being poured into U.S. Treasury bonds, which are closely tied to rates for home loans, that rise has yet to come about – a definite plus for the residential real estate market here in the states as it confronts an expected drop in sales activity now that the homebuyer tax credit has expired.
According to Freddie Mac’s rate report released Thursday, interest rates on 30-year fixed-rate mortgages (FRM) averaged 4.78 percent (0.7 point) this week, down from last week when the average rate was 4.84 percent. According to the GSE’s study, the 30-year FRM has not been lower since the week ending December 3, 2009, when it averaged 4.71 percent.
The 15-year FRM this week averaged 4.21 percent (0.7 point), Freddie Mac reported. That’s a slight drop from last week when it was 4.24 percent. Freddie says the 15-year FRM has not been lower since it started tracking 15-year rates in August of 1991.
“These low rates will help to elevate homebuyer affordability and soften the effects of the sunset of the homebuyer tax credit,” said Frank Nothaft, Freddie Mac’s VP and chief economist. “The latest information from Freddie Mac’s repeat-transactions home-price indexes also show some encouraging signs, with national metrics either slowing their descent or showing a modest rise, suggesting that the sharp downturn in national indexes since 2006 may be nearing an end.”
A separate study from Bankrate Thursday also puts mortgage rates at 2010 lows. Bankrate’s survey is based on data provided by the top 10 banks and thrifts in the top 10 markets.
Thirty-year fixed mortgage rates dropped to 4.92 percent (0.42 point) – a record low in Bankrate’s weekly survey. Last week, the 30-year rate came in at 4.96 percent.
The average 15-year fixed mortgage was unchanged from last week in Bankrate’s study at 4.34 percent, as was the larger jumbo 30-year fixed rate at 5.75 percent.
“The angst of investors around the globe about European debt, slower growth in China, and saber-rattling on the Korean Peninsula all feed into what is known as the ‘fear trade,’” Bankrate said in its report. “That fear trade has helped bring yields on U.S. Treasury securities considerably lower and mortgage shoppers have been direct beneficiaries.”
